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Obama Stands By Daschle in Tax Flap

Jan. 8: Tom Daschle prepares to testify on Capitol Hill on his nomination

WASHINGTON -- President Obama "absolutely" stands by Tom Daschle's nomination to be secretary of health and human services even though the former Senate majority leader dodged paying more than $128,000 in taxes until he after he was nominated.

The president gave the one-word answer Monday while in a meeting with Vermont Gov. Jim Douglas

Daschle is the second Obama Cabinet nominee to come under scrutiny for failure to pay taxes. Treasury Secretary Tim Geithner was confirmed last week despite revelations he failed to pay employer taxes in IRS filings between 2001 and 2004.

Daschle apologized on Monday for what he called income tax errors that resulted in $146,000 in back payments and interest, including $6,000 paid Monday on the request of the Senate Finance Committee.

White House spokesman Robert Gibbs said the reports about Daschle are "very serious," but that "the president also believes that Senator Daschle continues to be the right person for the job of  -- the very big job of making sure our health care system works for everyday Americans."

Daschle was meeting with members of the panel Monday after sending a letter to its members saying he was "deeply embarrassed" and would answer any questions a Senate panel had about them.

"I apologize for the errors and profoundly regret that you have had to devote time to them," Daschle said in a letter to Sen. Max Baucus, the chairman of the Senate Finance Committee, and Sen. Charles Grassley, the top Republican on the panel, released on Monday.

"I will be happy to answer any committee members' questions about these issues," Daschle, a former Senate majority leader, told the senators in a letter dated Sunday.

"As you can well imagine, I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns," he added.

Daschle recently filed amended tax returns to reflect $128,203 in back taxes and $11,964 in interest after questions were raised by the Senate Finance Committee reviewing his nomination. 

Daschle spokeswoman Jenny Backus told FOX News that an additional $6,000 is related to a car service he used. The amount covers Medicare payroll taxes due for the driver who provided car service for Daschle.

Backus said Daschle asked his accountant in June if the car service could be a tax issue. He did not learn until late December that the service -- valued at more than $250,000 over three years -- was subject to taxes. The issue never came up at Daschle's first hearing before members of the Senate Health, Labor and Pensions Committee on Jan. 8.

The financial disclosure form Daschle filed about a week ago also shows that he made more than $200,000 in the past two years speaking to members of the industry that President Obama wants him to reform.

The speaking fees were just a portion of the more than $5.2 million the former South Dakota senator earned over the past two years as he advised health insurers and hospitals and worked in other industries such as energy and telecommunications, according to a financial statement filed with the Office of Government Ethics.

Daschle's financial disclosure report was released after he acknowledged that he had recently filed amended tax returns for 2005-2007. The amended returns reflect additional income for consulting work, the use of the car service and reduced deductions for charitable contributions.

Daschle wrote that his "mistakes were unintentional" and he had "disclosed this information to the committee voluntarily, and paid the taxes and any interest owed promptly."

Baucus said that the finance committee is vetting Daschle's nomination and will reveal any details afterward.

"The ability to advance meaningful health reform is my top priority in confirming a secretary of health and human services, and I remain convinced that Senator Daschle would be an invaluable and expert partner in this effort. I am eager to move forward together," Baucus said.

The Finance Committee told Daschle on Friday the taxes out to be paid and Daschle asked his accountant to review it over the weekend. Daschle will pay the amount today.

Backus said Daschle considers the tax mistake "stupid" and is doing all he can to remedy the situation. She said it should not be missed that the Internal Revenue Service conducted a random audit of Daschle in 2006 and found no reason to change his return.

Backus said the money he earned in speaking fees from health care interests do not pose a conflict for the health care reform Obama wants him to lead.

"He welcomed every opportunity to make his case to the American public at large and the health industry in particular that America can't afford to ignore the health care crisis any longer," she said.

Among the health care interest groups paying Daschle for speeches were America's Health Insurance Plans, $40,000 for two speeches; CSL Behring, $30,000; the National Association of Boards of Pharmacy, $16,000; and the Principal Life Insurance Co., $15,000.

Obama has said that no one in his administration who has lobbied on a set of issues within the past two years can deal with the same subject matter. The president has already approved a few exceptions. Daschle is not a registered lobbyist but he worked at a lobbying firm.

Daschle said in a letter to the Department of Health and Human Services ethics office that if he's confirmed by the Senate, he will resign as a senior policy adviser at the Washington law firm of Alston & Bird LLP. He reported earnings of more than $2 million from that firm during the past two years.

Daschle also earned more than $2 million in consulting fees from InterMedia Advisors LLC of New York, an investment firm specializing in buyouts and industry consolidation. He said he also intends to resign from that firm upon his confirmation.

Democrats expressed strong support for Daschle and credited him with acknowledging a mistake. Republicans took some shots at the new administration now that a second Cabinet pick has run into tax problems and an earlier nominee withdrew amid a grand jury investigation. However, they said they would take the time to hear Daschle's explanations.

The Senate Finance Committee planned to meet behind closed doors to discuss the Daschle nomination. Daschle has not been told when the committee will vote on his nomination.

Senators said Sunday they will await guidance from the finance panel before deciding whether the tax problem could stall or even derail his confirmation.

Sen. Jon Kyl, who is on the committee, said members will try to understand his explanation. "I think it's too early to tell," Kyl, R-Ariz., said on "FOX News Sunday." "Well, sure, you have to be troubled by it."

But a Democratic committee member, Sen. John Kerry of Massachusetts, brushed aside concerns that Daschle's nomination was in jeopardy.

"It's obviously a mistake. But I think it's an innocent mistake. I don't think it affects one iota his ability to do the job," Kerry said on NBC's "Meet the Press."

FOX News' Major Garrett and The Associated Press contributed to this report.